Clarifying U.S. Healthcare and Insurance

Op-Ed
Letter to the Editor

 Kaiser Permanente CEO  George Halvorson  with Former U.S. President Barack Obama

Kaiser Permanente CEO George Halvorson with Former U.S. President Barack Obama

Jacob Faturechi, CIC is a California insurance agent-broker. He is a Certified Insurance Agent for Covered California and an independent representative of several insurance companies.

I love your site for its philosophy of respect for context and expertise. While we keep on hearing about how only tweets and sound bites matter, the truth is that there is a real thirst for longform content. Your recent article on the Republican Stance on Healthcare and "Pre-Existing Conditions" was better than most in providing real analysis of healthcare reform. Most of us are aware that healthcare is very complicated. I would like to add some greater context to where you started.

Former Breitbart editor Ben Shapiro likes to repeat the assertion cited that universality, quality and affordability cannot co-exist, but his only source is the fact that his wife is a doctor.

If knowledge were transmitted sexually, educating the public about health insurance would certainly become less of a chore. Being a doctor by itself is no qualification for drawing conclusions about the economics of health insurance.

It obviously didn't teach his wife about the Law of Large Numbers, marginal costs and freeriders. Universality helps to guarantee quality and affordability. The more people in an insurance market, the better it functions, not worse. 

This is especially true when we have to deal with people who refuse to buy insurance they can afford only to end up consuming healthcare they cannot.

No advanced society on Earth denies healthcare on the basis of payment.

We will not abide rifling through people's pockets for an insurance card before the paramedics go to work saving a child's life. The de jure lack of universality is a problem that makes our healthcare system less affordable. More people buying healthcare distributes capital costs to more pockets. Capital costs such as research are a significant part of healthcare costs. Fewer medical bankruptcies lower the need to transfer costs through higher prices to those who can pay.

The need for universality in order to have quality and affordability is the exact problem that the individual mandate addresses. The reason Republicans repealed the individual mandate is indeed because of Democratic promises.

How could Republicans not force Democrats to take the blame for a policy as unpopular as eating kale, even though the idea was first championed by conservatives?

Removing universality is how they claim to be repealing Obamacare. These same "conservatives" are now proposing default auto-enrollment as an alternative solution. The more fiscally conservative alternative to the government making us sign up for health insurance is for the government to sign us up without telling us!?

These are also the same insurance concepts that debunk the idea that allowing people to buy insurance a la carte would lower costs.

Dental plans are the perfect examples of how this fails.

These largely unregulated plans hardly qualify as insurance. Insurance is meant to pay for unexpected, not routine, costs. Dental policies generally do the opposite. Worse is the increased burden on actual health insurance for the behavior of people who are not adequately insured. People who don't have dental coverage cost our emergency rooms more than $1 billion per year. Illness has an unfortunate tendency to not confine itself to the organs we decided to insure. An infected tooth can result in fatal meningitis.

Which brings us to yet another common Republican talking point, which was omitted in the article but deserves notice. Many Republicans like to point out that studies have shown being on Medicaid (Medi-Cal in California) has the same results as being completely uninsured. This fact will seem incredible until we recognize that our system only lacks de jure universality.

In reality, people who cannot afford their healthcare are forced to spend down their assets until they are poor enough to qualify for Medicaid.

I have had to explain this to many uninsured clients who come to me when they receive frightening diagnoses during closed enrollment periods

"You will not die. You will be forced into bankruptcy."

We don't actually deny people healthcare. Nobody is dying in the streets. The estimates for the number of people who die in the United States for lack of healthcare is mostly attributable to people who choose to live and die with their illness over becoming indigent. We also end up paying extra for people who did not receive adequate preventive care. Removing people from the Medicaid rolls does not prevent them from relying on Medicaid when they do become sick. Many bills end up being paid through retroactive Medicaid coverage. 

The article also misses key context as it jumps from statistics for Medicare to Medicaid without distinction. The two programs have very different pay schedules which are much lower than what employer based insurance pays doctors. This is the real source for the problem so many people have had keeping their doctors. Something surprising has become obvious with our experience under Obamacare. Before the Affordable Care Act, it was largely assumed that providers disliked taking Medicare and rarely accepted Medicaid because both pay schedules were far below true market rates. Some hypothesized that the reason we pay so much more for healthcare than other countries may be because of government coercement to take Medicare and Medicaid at rates below cost. 

Our experience now shows providers increasingly preferring Medicare reimbursement to Obamacare reimbursement that doesn't involve government coercion. The competition and price transparency built into the newly-created Obamacare marketplaces has consumers imposing market pressure on healthcare.

Pharmaceutical company Mylan had the temerity to blame Obamacare for consumer outcry over their prices. 

The credit does belong to Obamacare, which has repeatedly proven itself to be an exceptional market-based solution to our problems.

When consumers are exposed to the real cost of the things they demand, nurse practitioners in your local pharmacy suddenly don't sound like a bad alternative to a doctor in an expensive medical building for simple healthcare needs. 

This is the root cause of another dirty little secret about Republican proposals for healthcare reform. The proposals are based, and deliberately so, on higher deductibles. This common complaint about the effects of Obamacare is a feature, not a bug. 

The rate increases cited by the article are also deceptive. Silver plans are special cases because of the Trump administration's treatment of Cost Share Reductions. Covered California has imposed a surcharge upon them. Bronze plans, which reflect the skimpier level of insurance Republicans have advocated for all people, tell a much different story.

In 2017, the rate change for Bronze plans in northeast Los Angeles was -4.1%. You read that right. The rates actually decreased! While rates have gone up, a good share of the blame goes to Republican sabotage. More importantly, rates have risen at a slower pace than anticipated.

 Provided by: Covered California

Provided by: Covered California

The most pressing issue regarding pre-existing conditions is actually not whether someone sick will find a way of getting insurance. Employer policies have long been guaranteed issue causing job-lock. Which brings us to the Original Sin of American healthcare insurance, the employer tax exclusion. The topic deserves an in-depth treatment by itself.

Last, but certainly not least, I have to wonder about the source of the scattershot and curious tour through the insurance systems in other countries. For systematic analysis, I would recommend consulting former Kaiser Permanente CEO George Halvorson who served as Chair of The International Federation of Health Plans for nearly a decade. He recommends a system based on the German and Swiss models, which incidentally happen to be the basis of the Affordable Care Act.

I certainly commend you for trying to bring some depth to the ongoing healthcare debate. I will gladly engage in the discussion.

The Republican stance regarding Obamacare is one of the main reasons why I recently abandoned my lifelong registration with the Grand Old Party.

Many Democrats refuse to laud the free-market nature of Obamacare because they prefer government-based solutions. Many Republicans refuse to laud it because it was passed by Democrats.

The truth is that Obamacare, despite being unpopular, has been wildly successful as a free-market solution by every quantitative measure available. I defy anyone to point to a quantitative measure which does not show Obamacare performing at least as well as what we had before it. 

The Affordable Care Act certainly can use some tweaks. That is yet another discussion requiring even more context. 

Who knew healthcare could be this complicated?

Everyone who has given it serious thought.